Tangerine’s No-Fee Cash-back MasterCard – The New Cash Back King?

This is a guest post by credit card enthusiast and regular reader – Elbyron

Tangerine has recently announced a new no-fee cash-back credit card which is expected to quickly become one of the most popular cards in Canada. In addition to having one of the best reward systems I’ve ever seen, it boasts a wide range of features, and a lower than usual foreign exchange fee.

This card almost seems like it was specifically designed to appeal to MBNA Smart Cash cardholders who are fed up with the limits and inflexibility. It’s reward structure is similar, but is improved over Smart Cash in many ways.

Rewards

Earn 2% cash-back on purchases in up to 3 categories of your choice, with NO MAXIMUMS.

Earn 1% cash-back on all other purchases (also no maximum).

The reward is automatically redeemed monthly.

Choose to get a statement credit or a deposit to your Tangerine Savings account (excluding TFSA).

If you choose the statement credit for your redemption, you get to pick 2 categories for the 2% cash-back. If you choose the deposit to a non-registered Tangerine savings account (either sole or joint account holder), then you get to pick a third category.

You can change your categories to suit your spending: once initially set, the categories can be changed every 90 days. The changes take effect on the next monthly statement date after current categories have been in effect for 90+ days. Which category a purchase falls under depends on the merchant, not the item you purchased. So if you buy pharmacy items from your local grocery store, they will actually count as Grocery, not Drug Stores. Conversely, if you bought food from Shoppers Drug Mart, it goes under Drug Stores and not Grocery.

Recurring Bill Payment: Recurring bill payments are defined as payments made on a monthly or other regular basis, and which are automatically billed by the merchant to your Tangerine Money-Back Credit Card, such as your monthly phone bill. Not all merchants offer recurring payments, and not all ongoing payments will be considered “recurring payments” for purposes of this category. Please check with your merchant to see if your recurring payment qualifies.

Unfortunately, no Costco but…

Because Costco categorizes themselves as “Discount Stores” (5310), they will not qualify for any of these categories. However, Costco gas stations are correctly categorized as Gas. Walmart.ca is also a “Discount Store”, but their Supercenter stores are usually “Grocery”. Online merchants like Amazon or eBay likely won’t qualify either. There is currently no categories for electronics, flights, fitness (except recurring membership costs), medical, liquor, contractors, insurance (unless recurring), jewelry, and many other high-spending categories. But we can always hope that they’ll add more in the future!

You can request additional cards for up to 5 authorized users, but your 2 or 3 category choices will apply for all of them. All the cards accumulate cash-back, but the primary cardholder receives all the rewards to their chosen destination. Your significant other could just get their own card with different categories, but they wouldn’t be linked and you would have two bills to pay.

Cost

No annual fees;

No cost for additional authorized users (up to 5);

19.95% interest rate;

Foreign currency exchange rate: Mastercard’s base rate + 1.5%; and,

With an interest rate of 19.95%, this is not a good choice of credit card for carrying a balance, as there are other cards in the range of 7 – 10%. Also note that even if you choose to get your cash-back as a statement credit, this does not reduce the minimum payment amount (just your total balance).

Benefits & Features

90-day purchase assurance (theft/damage/loss);

Double manufacturer’s warranty up to 1 extra year;

Ability to setup online travel notifications;

Pause-my-card feature, in case you temporarily misplaced your card;

Customizable alerts: you can be notified of every purchase, if you want;

Most of these features are starting to become common-place, but there doesn’t seem to be many cards that offer all of them. Tangerine also has a well-designed and easy-to-use website, plus they are known for pushing the envelope on new online banking features.

Foreign Purchases

While it’s a little disappointing that Tangerine didn’t go with a zero foreign exchange fee – to compete with the Chase Amazon.ca Visa card – a fee of 1.5% isn’t all that bad. The vast majority of Canadian credit cards charge a 2.5% fee, though Canadians are often unaware of this because the banks like to “hide” it on the statements by simply showing an inflated exchange rate that includes this fee.

Another benefit to using this card for foreign currency purchases is that Mastercard’s base exchange rate is typically more favourable than Visa’s. If your purchase happens to be in one of your chosen 2% categories, the extra percent could make it comparable to the Chase Amazon.ca card.

Cash While Travelling

Another potential use for this card is obtaining foreign cash while out-of-country. The flat $5 out-of-Canada cash advance fee means that if you withdraw a large enough amount at once, you can get cash for a fairly cheap rate. For example, withdrawing $1,000 CAD worth of the local currency from an ATM would cost you $5 (0.5%) plus a 1.5% fee over MasterCard’s excellent base rate. This is likely to be cheaper than most other methods of obtaining foreign cash, but there is a catch: unlike other purchases, interest will begin accruing immediately on the cash advance, until the day you pay off the balance.

Fortunately there is a simple trick to avoid paying any interest on the advance: first pay down any current balance, then make a payment for an additional amount to cover the cash you want to withdraw, plus $5 for the fee, plus a little extra to account for fluctuations in the exchange rate. When you go to withdraw from the ATM, you already have a positive balance, which gets used to immediately pay for the cash advance, and therefore no interest is charged. This isn’t really a “trick”, as all credit card companies apply over-payments towards future purchases. It works with pretty much any card – just be aware of the foreign exchange fees and cash advance fees.

How it Stacks Up

There are lots of no-fee cash-back cards available, but only one other – MBNA Smart Cash – offers rewards as high as 2% on select categories. However, the 2% bonus on Smart Cash is restricted to gas & groceries and only applies to the first $400 of each month spent in those categories. Furthermore, unless you upgraded to the World version of Smart Cash, even the 1% is limited to a $1,250 monthly spending cap. (not available anymore)

The fact that Tangerine’s card has no limit on the rewards will seem very appealing to those who would normally exceed those limits. However, it should be noted that those who spend over $5,000 per year on their credit cards may be better off with a premium cash-back card with an annual fee, depending on how much you spend in your 2 or 3 highest spending categories.

At the other end of the spending spectrum, those who only charge small amounts to this card will automatically give you all your accumulated cash-back every month. It is quite clear that Tangerine’s new card is designed to beat Smart Cash and become the new cash-back king!

How to Get It

You must be 18 years old, but there is no minimum income requirement on this card. Right now, this is the best free cash back credit card in Canada. Click here to apply or to get more information about the Tangerine Money Back Card..

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I have the Chase Amazon.ca card too, but their cash-advance fee is not a flat $5, it’s the greater of $5 or 1% of the amount. Let’s say you were withdrawing $1000 USD cash on Oct 5th. First we apply the foreign exchange: Visa’s exchange rate was 1.327267, and with no foreign exchange fee on the Chase card, you’d pay $1327.27 Canadian. Mastercard’s rate, which is almost always lower, was 1.313300 on that day, with an additional 1.5% fee that makes it a 1.333000 rate, and the Tangerine user would pay $1333.00. Next there’s the cash-advance fees. For the Chase card, you’d pay 1% of $1327.27, which brings the total cost to $1340.54. The fee is always a flat $5 with Tangerine, so the total there is $1338. Tangerine wins!

Of course, there are 2 parameters that matter here: the amount withdrawn (because the Chase 1% cash-advance fee makes more difference with larger amounts), and the difference between the Visa and MC exchange rates. On Oct 5th the difference was 1.06%, but on Oct 2nd it was only 0.65%. Oct 1st it was 1.07%, but Sept 30th it was 0.24%. There is no way to guess how much MC’s rate is going to beat Visa’s rate, so you really won’t know for sure which card is cheaper for foreign cash withdrawals. Personally, I’ll just keep using Chase, even though it’s not always the best for this!

Good points Ray. Cash Back king title may be a bit dramatic, but it’s meant to be compared to other “free” cash back credit cards. The premium Scotia card is a awesome card, but spending has to justify the annual fee.

I didn’t want to put this no-fee card side-by-side with a premium card, but I did mention that those with over $5000 annual spending might be better off with one. It’s great that you’re getting back a $1450 reward, and the Momentum VISA might be the “king” for you personally, but that doesn’t make it the best card for everyone.

Let’s say that someone’s highest spending categories are gas, groceries, and drug stores. Then the Tangerine card and Momentum have the same rewards except for Momentum having 2% more in gas & groceries. Thus to offset the $99/year fee you’d have to spend 99/0.02 = $4950 or more per year on gas and groceries before Momentum became worthwhile ($412.50/month). For a couple, Momentum costs $129/year and they would have to collectively spend at least $6450/year, or $537.50/month in order for the extra benefit to cover the cost. And of course, if your highest 3 categories are not gas, grocery, and drug stores, then the benefit gap may be even smaller because Tangerine would give you 2% on purchases that are only earning you 1% on Momentum. You might also want to factor in purchases made in foreign currency, where you are paying a 2.5% fee on Momentum versus 1.5% for Tangerine, and you’re also paying a higher base exchange rate due to Visa being less competitive than MC in that regard.

I’m thinking of getting this card to complement my scotiabank momentum visa infinite. I’ll put the 2% whichever is not on the momentum (everything other than gas,groceries, recurring, drugstore), such as restaurant, entertainment and home improvements, which I currently use amex blue because it gives me 1.25% on all purchases, also I support tangerine’s no fee message, so it’s a company I would want to support, I already have a chequing and savings account with them!

I’ve never heard of any such cards. Closest thing is an administrative fee that some banks charge if you maintain a positive balance for a year or more. Could you provide an example of a card that won’t allow pre-payment? I’m curious what they do if you overpay, just immediately mail you a cheque for the amount that’s over?

I’ll stick with the Capital One Aspire MasterCard. 2% credit on all purchases with no limits and if you’re grandfathered in only $20 per year annual fee ($120 fee minus $100 anniversary bonus). Even at $120/year it is touch to beat. Plus it is accepted at more places than Visa (eg. Costco and NoFrills) and you don’t need to worry about categories – everything qualifies. Plus the benefits and top notch. I’d go with this one or the Rogers 1.75% cashback card. The only downside to Capital One’s is that the 2% cash back is only as a credit towards travel purchases (Expedia, airlines, etc) but if you travel on occasion it is a breeze. We get back over $1000 every year easily.

It will be changing to $150 within the next month or two. They will also be increasing the sign-up bonus to 40,000 points (currently 10,000) so the extra $300 worth of points will pay for 10 years of the increased fee.

It’s very likely existing users will be grandfathered into the $120 annual fee. For new customers who have to pay the extra $30/year, having the extra $300 sign-up bonus means that the additional amount over the $120 (so $30) is covered for 10 years by the bonus. Thus for people thinking of getting Aspire, you should sign up immediately if you plan to hold it for 10+ years, or wait for the changes if you plan to keep it for less than 10 years.

I agree with you completely, the Aspire is the king of all premium cards, and is especially a good deal for those with the grandfathered $120 fee and anniversary bonus. I personally am one of those fortunate people, and plan to keep my Aspire card for a long time. Particularly since they’ve now eliminated the redemption tiers and allow partial point redemptions too. It’s actually a 2.04% cash-back, because you get points for your travel purchases that you later “erase” with the points. For example if I spend $4900 on various stuff and $100 on travel, then use the 10000 points to erase the travel charge, I’d have spend $4900 to get a $100 credit, which means the return is 100/4900 = 0.0204 or 2.04%. And even if all my spending was in 3 categories, I’d still pick Aspire over Tangerine because of all the great travel insurance benefits!

“you get points for your travel purchases that you later erase with the points”.

From my understanding of Capital One’s cardholder agreement, points are accrued by NET purchases only, meaning when you get a statement credit using your points, it will reduce the amount of points accrued on that statement.

My interpretation of the “NET purchases” thing is that if you return something and get a credit back to your account for it, the points are deducted. I checked my points transactions history and this is correct, they will subtract points when you return something (which makes sense). I just redeemed 120,219 points for a $1202.19 credit, and the points transactions history doesn’t show any subtraction of 2404 points (just the 120,219), so it is not treated the same as a return. I’ll check my final points balance on my next statement, but I’m pretty sure there won’t be any adjustment applied.

It wasn’t left off the list – assuming “the list” is the list of top PREMIUM cash-back cards which was linked to in this post (which is supposed to be specifically about the new Tangerine card, don’t know why people keep talking about other ones here). It ranked #3 in the list behind the Momentum card (4% on gas & groceries) and the MBNA Rewards World Elite card (2% cash-back for $89 fee). Even if you ignore the fact that maintaining a minimum balance in chequing has an opportunity cost, the MBNA RWE card with $89 fee still beats BMO with the fee exemption for those who spend over $35600/year, because the extra 0.25% would pay for the $89.

It’s definitely a good addition to the variety of Canadian cash back cards. Especially for people with lower income who wouldn’t qualify for MasterCard World Elite or Visa Infinite cards.
There’s one thing that many people talking about this card should consider though: when applying for the MBNA Rewards World Elite (2% cashback on all purchases, $89 annual fee –waived for the 1st year), if your application for a World Elite Account is not approved, then the application shall be considered as a request and consent to the opening of a Platinum Plus Account.
The 2% on every purchase makes it a much better option than Tangerine Money Back.
There’s a lengthy thread on RFD regarding this unadvertised card: http://forums.redflagdeals.com/mbna-rewards-travel-platinum-plus-mc-1219168/

Also, when mentioning that credit should be a good way to get cash abroad, the author seems to forget that Tangerine clients can access their Tangerine Account for free using their Client Card at any international ABM, such as Bank of America, BNP Paribas, Barclays, Deutsche Bank and Westpac, which are all part of Scotiabank’s Global ATM Alliance.
When withdrawing money at an ATM not part of the Global ATM Alliance, Tangerine only charges a fee of $2. This is a much better option than using a Credit Card for cash advances!

People who spend less than $8899 annually on their credit card are not going to benefit from the MBNA RWE card vs Tangerine, because even if you picked terrible categories and ended up getting only 1% on everything, the extra 1% earned by the RWE card would not make up for the $89 fee. I already mentioned that those who spend over $5000/year should consider premium (annual fee) cards, so I don’t know why the comments are being filled with people saying “this premium card is better”. Of course they are better – for some, but they can’t be the “no-fee cash-back king” if they aren’t no-fee cards!

I’ve heard a lot of people say that Tangerine debit card withdrawals are the best way to get foreign currency. But I’m quite sure Tangerine is merely playing the same “hide-the-fee” game as all the other banks. The article mentions how its done (built into exchange rate) and even though it’s talking about credit cards, banks do the same thing with debit withdrawals. They get to decide what rate to give you on the exchange, and it’s typically 2.5% above mid-rate (halfway point between market bid and ask prices for the currency). Tangerine’s terms say: “‘A Permitted Transaction in a foreign currency will be converted to the currency of your Account at an exchange rate determined by Tangerine on the date the Permitted Transaction is processed. This rate may differ from the rate in effect on the date of the Permitted Transaction.” Of course, they don’t advertise their rates anywhere so it’s difficult to prove, but other Tangerine users who are wise to the game have stated that “the actual forex rate is about 2.5% over the mid-rate”. Here is one such user: http://forums.redflagdeals.com/best-no-fee-bank-account-1475987/5/#post18760690

Paying $2 is still better than the $5 or 1% that is usually charged for cash advances, but if your exchange rate is only 0.5% or so above mid-rate compared to 2.5% for a debit withdrawal, then it will often be cheaper to use a credit card with no (or low) foreign exchange fees built into the forex rate.

Lots of choices. Have been using my CIBC Dividend card since it first came out. Think it was the first Cash Back card but it’s now behind the curve. Now use my Capital One MC Costco card and Think I will supplement with Tangerine.
Since we are now retired we spend 5-6 months in the US so what I now need it a Cash Back card in US $ offered by a Cdn company. Been using the CIBC US card for $35 p/a but no cash back. Anybody got suggestions?

The RBC Black Visa (U.S.) is linked with the Canadian RBC Visa although cash rewards, if switched back onto the Canadian card, can only be applied to a Visa payment and at 1/2 the number of $ transferred. So $5000 earned on your US Black Visa would result in a transfer of $2500 to be applied to a Visa payment. Less than ideal.

Just an FYI, MBNA Smartcash has direct deposit to your next Statement (go green save paper and stamp plus get your money sooner)… just go to your rewards login page and turn it on… they will pay you more than the $50 cheque to whatever your cash back balance is once it hit’s the minimum $50 rewards. ie. my last statement MBNA credited my account with $69.78

This card is going to come in handy right quick. Almost finished building our house and we are going to be getting a fair amount of furniture, fencing, landscaping, etc etc. Conveniently, all probably purchased over a 3 month period which coincides with their signup bonus. Having no maximums on the categories means we can probably get $600 cash back in a short time.

Anybody out there with a suggestion…
I run a small expedite cross border delivery service and will spend approx. $55,000 in fuel and vehicle related items.
Need a credit card for 3 drivers under the business .
Have a personal Capital One (CDN) but restricts business use and I need to change over to a card with cash back provision.
Open to your recommendations .Thanks

First I would like to say that for that kind of spend, you are mostly likely better off with a fee-based premium Cash-back card, because the spend will more than offset the fees and you will be farther ahead.

Second, the cards discussed on this site have been for consumer customers. Don’t recall much discussed for business use. That said, here are some of my recommended cards, in order of preference for your usage.

MBNA Rewards World Elite Mastercard. 2% cash-back on all expenses, no cap, $89/yr fee, no extra cost for additional cards.